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June 10 posts
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jgale | 
24 June 2010 at 11:10 | 297 views
On Tuesday this week I sat in the House of Commons to hear George Osborne deliver his first Budget. This was one of many Budgets which I have listened to over the years, but it was the only one to which I had contributed myself – in my short time in the Treasury as Chief Secretary. Frankly, it was frustrating to be watching a Budget that I had helped shape in some small way, without being a part of it all on the day, but that is now all water under the bridge.
This Budget was always going to a tough one. Britain has a mind-boggling £150,000,000,000 (£150bn) hole in its public finances. That means our Government is having to borrow an extra £3 billion EACH WEEK to meet all of its spending commitments. That massive borrowing threatens higher interest rates, market instability, and the economic recovery. And borrowing has to be paid back at some stage – so we have been placing a huge burden of higher future taxes on our generation and on our young people.
The “Party” has had to stop, and the Chancellor had to deliver some difficult news. Value Added Tax is to rise from 17.5% to 20.0% next year. However, items that VAT is currently not charged on will remain at 0% (VAT free) – items such as food and children’s clothes.
Spending is also going to be cut back. Some Government departments will see falls in their budgets of up to 25% over the period from 2011 to 2015. Nobody can remember cuts on that scale. Welfare payments are also being trimmed, with child benefit frozen for 3 years.
There will also be some tough decisions on public sector pay and pensions. The private sector has already experienced pay cuts and pay freezes over the last 2 years of recession, and now the public sector will be affected too.
There will be a public sector pay freeze from 2011 to 2013, and a new Commission under former Labour Minister, John Hutton, will look at the affordability of public sector pensions.
The result of all this will be to slice £40bn off the annual borrowing totals by 2014/15, and £120bn over the 5 years to 2015.
What that means is that the tough medicine will deliver. By 2014/15, borrowing will have fallen from the level of £155bn in 2009/10 to £37bn – just 1% of total national income.
The Chancellor admitted that the Budget is tough, but it is also fair. The starting rate for paying income tax is being raised by £1,000 to £7,475 in April 2011, taking almost 900,000 people out of income tax completely. This will in part be paid for by a higher rate of capital gains tax for some higher rate taxpayers, stopping some tax avoidance by those on upper incomes.
Lower paid public sector workers will be exempt from the pay freeze, and those with incomes under £21,000 per year will still receive pay rises.
The banks will pay more, with a special new tax which will raise £2.5 billion per year, and the child tax credit for those on lower incomes will be raised.
And on public spending, the budget of the National Health Service will be protected from cuts.
Finally, the basic state pension will once again be linked to the higher of prices, earnings or 2.5% from April 2011, restoring the earnings link for pensioners for the first time for almost 30 years!
Taken together, this means that although the package is pretty tough, those on lower incomes will not be the big losers. Indeed, it is the 10% of highest earners who will pay most extra as a consequence of the budget – both in total cash, and as a share of their incomes.
So, the country is in for some tough years, but at the end of the Parliament the state of the public finances will be much, much, better. And the action will be taken while protecting those on lower incomes and while protecting key front-line services.
And the good news is that because we are taking this action, it will be much easier for the Bank of England to keep interest rates low. That will be good news for businesses and mortgage-payers across the country.
Best wishes,
David.
Sadye | 17 June 2010 at 17:10 | 344 views
Last Friday I visited one of the largest employers in Yeovil Constituency – Honeywell Aerospace, which is based on the “Westland” factory site in the middle of Yeovil.
AgustaWestland is such a huge local employer that when people think “Aerospace – Yeovil” they invariably think only of Westland. But Honeywell, Aerosystems, GKN Structures and other big companies also employ large numbers of people in our area, and have a long record of industrial success. Honeywell alone employs some 600 people – which makes it one of the top ten employers in our area.
Honeywell’s history goes right back to 1933, when it was an integral part of the Westland site. The Houston Expedition’s first flight over Mount Everest with two Westland aircraft required the aircrews to be supplied with oxygen and heating – precursors of the systems that would eventually be produced by Normalair/Honeywell.
In 1967 minority ownership was acquired by the Garrett Corporation, and in 1998 the company was acquired by Allied Signals. “Honeywell NGL” finally became Honeywell Aerospace in 2003.
As I was shown around the factory, I saw some of the very high technology equipment which is produced in Yeovil, along with some of the assets acquired over the past decades. For example, in the 1960s, Europe’s largest test chamber was built on site for testing Concorde’s pressurisation system, and some of this early equipment for Concorde testing is still used today.
Work completed by the company over the last 15 years includes contributions to a whole range of aircraft from all nations – the F-22, the Nimrod MRA Mk4, the Hawk jet, the Eurofighter, the Joint Strike Fighter, the Dassault F7X, the EH101, and many more. Honeywell particularly specialises in environmental control systems, life support systems, electronic controllers and hydraulic systems.
The economic environment has obviously been very tough for many companies over the last couple of years, with the global recession combined with attempts by all Governments to rein back on their defence expenditure. I will do all I can to support companies such as Honeywell, AgustaWestland, GKN and Aerosystems for the future, but we also need to be realistic about the constraints facing Governments in an era of huge budget deficits.
At present, the UK Government is commencing a Defence Review, and this will have to take some tough decisions over the next few years to make sure that our equipment programme is affordable. While making the case as strongly as possible for our local products, we also need to identify the areas where the Government is going to need new equipment, as well as the opportunities in the export markets. The next 10 years will be very tough for the whole of the defence sector, and we need to ensure that our firms are amongst those which thrive and succeed.
On Friday afternoon I held a busy Advice Centre in Yeovil, and on Saturday morning I held another Advice Centre in Chard. I have to say that it was good to be able to focus my attention on helping sort out other people’s problems, rather than dealing with my own. The casework which MPs get involved in is some of the most worthwhile work we do, where you know that you can make a real difference to the quality of people’s lives.
This week I am back up in Parliament, and there is a lot going on. The last Government simply ran out of steam, so there is a nice contrast in seeing a new Government with lots of ideas and energy, getting on with things. It is frustrating to be on the sidelines at this time, but that is how things have worked out.
I would like to say again how enormously grateful I am for the thousands of generous messages of support over the last few weeks. I am taking the time to read every single message personally, and I will try to reply to everyone who has written – but this will take a little time.
This Friday I will be holding another Advice Centre in Yeovil, and on Saturday I have Advice Centres in Ilminster and Crewkerne.
David.